United States District Court for the Western District of Michigan; Docket No. l:99-CV-784;
Honorable Robert Holmes Bell; Published
Official Federal Reporter Citation: 92 F. Supp. 2d 663; Link to Opinion
In this priority dispute between a no-fault insurer and a fully insured ERISA health plan, the court held that the ERISA plan was primarily liable for the medical expenses arising from an automobile accident where there were competing coordination of benefits clauses in the two (2) policies.
The court held that under section 3109a of the No-Fault Act, and the Federal Kemper decision, priority falls upon the health insurer.
Judge Bell rejected the arguments of American Medical Security that there was no difference whether the plan was self-insured or insured, and that if the benefits are provided by an ERISA plan, the ERISA statute preempts state law. Judge Bell held that the cases relied upon by American Medical all involved "self-funded" plans, and were distinguishable. American Medical's argument that the decision in Lincoln Mutual Casualty Company v Lectron Products Employee Health Benefit Plan, 970 F2d 206 (6th Cir, 1992) supported its position, was not correct, as the Lincoln Mutual fund was a "self-funded plan" although it purchased "stop loss" insurance. Judge Bell held that American Medical overstated the holding of Lincoln Mutual by improperly equating a plan that purchases stop loss insurance with a plan that is fully insured. "A self-funded plan that has purchased stop loss insurance is still a self-funded plan. It is also essentially different than a fully insured plan."
Although self-funded ERISA plans are generally sheltered from state insurance regulations, fully funded plans are not. Clients that purchase insurance are directly affected by state laws that regulate the insurance industry. The fully insured plan in this case is subject to indirect state insurance regulation through 3109a. The insurance policy purchased by the plan to fund the benefits is primarily liable for the medical expenses arising from the automobile accident.